I recently read the story of a young woman who had received a $5,500 prepaid Netspend debit card in the mail and was wondering if it was legitimate.
Too Good To Be True
You may have heard the old adage that “if it sounds too good to be true, it probably is.” Getting a $5,500 prepaid debit card in the mail – out of the blue –definitely falls into this category. The only way I can think this might be legitimate is if she had won a contest or had a rich aunt who was gifting her but has forgotten to mention it. Barring that I would suggest to this young lady that she read all the fine print that came with this card, as it’s either some kind of promotional come on or a downright scam.
How debit cards work
A debit card is really a sort of electronic check. It’s a way to access money from a checking or savings account. It can be used to pay for almost anything at any merchant that accepts Visa or MasterCard. For example, I have a debit card and use it to buy groceries, clothes, gasoline, and restaurant meals and even pay for online purchases. It’s a very convenient way to pay for things and is as an excellent way to track spending. But a debit card is not the same as a prepaid card. It must be linked to either a checking or savings account and its only limit is how much money you have in the account it’s linked to.
NetSpend bills itself as a prepaid debit card. However, as nearly as I can tell it’s just a prepaid card. It might be describing this card as a prepaid debit card but it seems to me that this is just marketing. It works like any prepaid card. You deposit money and then use the card to pay for stuff until you reach a zero balance. At that time you can either throw the card away or load more money into it.
How you load a NetSpend card
NetSpend offers several options for depositing money on one of its cards. You can direct deposit part of your paycheck, use a tax refund or one of its reload locations, which it says are available at more than 100,000 locations, including grocery stores, check cashing stores, MoneyGram® agents, gas stations and Western Union® agents.
For the “un-banked”
I recently read that there are 9 million people in America who are “un-banked”. In other words they have no bank account of any kind. It seems to me that the NetSpend would be ideal for those people. It would give them the benefits of a standard debit card but without the need to have a checking account behind it. I also see that it could help people manage their spending because there’s no way they could overcharge on one of these cards.
A better card
However, if your goal were to create a credit history or rebuild your credit, a secured card would be a better solution than a prepaid card even if it’s called a prepaid debit card. As you may know, a secured card is one where you deposit money in advance to secure it. In most cases this will be $300 or $500. You can then use the card just as you would a normal credit card so long as you do not exceed your spending limit, which would be the $300 or $500 you used to secure it. How you use this card will be reported to the three credit bureaus. If you use it sensibly – by paying your balance off on time each month and by not exceeding your limit – you will begin building a credit history. Or if you have a poor credit history, a secured card could help repair it.